The Centre for the Promotion of Private Enterprise (CPPE) says the latest hike in interest rate by the Central Bank of Nigeria (CBN) is detrimental to investment and economic growth.
Chief executive officer of CPPE, Muda Yusuf, said in a statement that the economy needs oxygen and stimulus, not policy measures that would worsen an already suffocating situation.
According to him, the latest monetary conditions are very difficult to bear for most businesses, given the prevailing macroeconomic and structural conditions.
“The latest policy choice of the apex bank is at variance with the mood of most economic players and the desire to promote economic recovery and growth.
“What manufacturers and other investors need at this time is some oxygen and stimulus, not policy measures that would worsen an already suffocating situation,” Yusuf stated.
He further noted that most of the extra money in the system comes from the public sector, so the solution should focus on that and the private sector should not be made to pay the price of liquidity growth which they were not responsible for.
“Issues of excess liquidity should be addressed within a causative context. The injection of liquidity into the system is largely public sector-driven, as rightly noted by the CBN governor. Therefore, the focus of resolving it should be within that context.
“Stifling the financial conditions to address liquidity issues is detrimental to investment and growth of the economy. The implication of the latest MPC decision for investors is quite concerning as cost of funds would be further exacerbated, possibly well above 35% or more. It is made worse by the increase in CRR to 50% and retention of an asymmetric corridor of +500 and -100,” Yusuf said.
He warned that the increase in CRR to 50 per cent would have negative consequences for the banking system and the economy as it would constrain financial intermediation with negative consequences for the banking system and the economy.
